'Longest Day' for Europe as Greek Vote Looms: Analyst

Tuesday will be the “longest day” in Europe, John M. Hydeskov, chief analyst at Danske Markets in London, told CNBC Tuesday morning.

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The former Greek Prime Minister, George Papandreou

The recently reshuffled Greek government, which has a very small majority, faces a vote of confidence on Tuesday night, after the Troika announced that it would withhold a 12 billion euro ($17.2 billion) loanuntil the new austerity measures are passed.

“It’s a very strong move by the Greek Prime Minister,” he said. “He’s standing up and expecting to get a strong platform after this.”

The planned second bailout of Greece by the 'Troika' of the European Union (EU), International Monetary Fund (IMF) and European Central Bank (ECB) has to succeed as failure could be disastrous, Hydeskov said.

“The alternative of not getting the money is so frightening that we don’t have another choice,” he added.

“Financial markets are often accused of being very short-term minded. This time, financial markets can easily see that this (the second bailout) will not solve the problem,” he added.

Prime Minister George Papandreou last week raised the possibility of stepping down in order to build a government of national unity. On Thursday finance minister George Papaconstantinou was replaced by Evangelos Venizelos.

However, the government is contending with an increasingly restive populace, who have taken to the streets of Athens to protest against planned tax rises and public spending cuts.

“They need to come up with some taxes that are less controversial than social taxes,” Hydeskov said.

Asked why the Greek government doesn’t just pursue better enforcement of its existing taxes, as tax avoidance is one of the key problems with the country, Hydeskov said: “It sounds very simple when you say it like that but not in this country.”

He added that tax on real estate and empty incomplete buildings could help raise tax revenues while not impacting ordinary people too badly.